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08-18-07, 10:12 AM #1
David Dadante pleads guilty to fraud
David Dadante pleads guilty to fraud in investment scam
Dadante's investment scheme financed his lavish lifestyle, then lost $28 million
Friday, August 17, 2007
Plain Dealer Reporter
David Dadante stole millions of dollars from his friends to pay for gambling trips, a new house in Gates Mills and other lavish items.
Now Dadante, who portrayed himself as an investment whiz but broke the law to hide his investment losses, will probably spend the next decade in prison after pleading guilty Thursday to two counts of securities fraud.
Dadante lives in South Euclid after his Gates Mills home was taken as part of a court settlement. Prosecutors believe Dadante lost about $28 million through a series of bad trades, artificially manipulating stock prices and outright theft.
"He did this with the intent to defraud," Assistant U.S. Attorney Justin Roberts said. "The crimes of which Mr. Dadante now stands convicted caused substantial harm to the investing public and the integrity of public markets."
The FBI is still investigating several brokers who handled Dadante's trades. More criminal charges are expected in the case.
Dadante, 53, established the IPOF Fund in 1999. He promised investors he would buy only blue-chip stock, acting on tips he got from a friend who handled money for Donald Trump. He even showed them financial documents showing money he purportedly earned through stock trades.
Those documents, like Dadante's friendship with Trump's adviser, were frauds.
Instead, Dadante operated a massive Ponzi scheme, taking in more than $46 million from investors. Dividends he paid out to investors actually were money coming in from new investors.
Much of the money for the IPOF Fund came through Frank Regalbuto, a successful builder and horse breeder who befriended Dadante.
Regalbuto's vast network of friends and business partners, including many prominent members of Cleveland's Italian-American community, poured money into the fund.
Dadante used some of the money to buy huge amounts of stock in Innotrac, a small Georgia company.
Working with his brokers, Dadante used a variety of techniques to artificially inflate the stock's value, including buying blocks of stock just before the market closed and buying stock in small blocks to give the appearance of heavy trading, Roberts said.
Dadante's scam fell apart in 2005, when an investor realized the IPOF Fund owned most of Innotrac's stock. Dadante was confronted by investors and admitted that many of the documents he had been supplying them were fake.
Besides the criminal investigation, at least three lawsuits are still unresolved. In one, Regalbuto and other investors are suing Dadante. In another, a small group of investors are suing Regalbuto, claiming he is partially responsible for Dadante's losses.
Under his plea agreement, Dadante will probably be sent to prison for 10 to 12 years when he is sentenced later this year.
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